You are looking to invest in two shares, X and Y, and have the following information: (a)

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You are looking to invest in two shares, X and Y, and have the following information:

Share X Y Possible return (%) 30 25 20 50 30 10 Probability 0.3 0.4 0.3 0.2 0.6 0.2

(a) Calculate the expected return for each share and for a portfolio of 60 per cent X and 40 per cent Y.

(b) Calculate the expected risk of each share and of the portfolio as defined above if the correlation coefficient of the two returns is +0.15.

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Corporate Finance Principles And Practice

ISBN: 9781292450940

9th Edition

Authors: Denzil Watson, Antony Head

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Question Posted: Nov 02, 2023 07:20 AM

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You are looking to invest in two shares, X and Y, and have the following information: (a)

Question:

Share X Y Possible return (%) 30 25 20 50 30 10 Probability 0.3 0.4 0.3 0.2 0.6 0.2

Step by Step Answer:

a Expected Return for a Share Possible Return Probability Expected Return for the Portfolio Weight o...View the full answer

Corporate Finance Principles And Practice

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